Answers · UK 2025/26

Does overtime pay push me into a higher tax bracket?

Overtime is taxed as normal income, so it can push your total earnings for that pay period into a higher tax band -- but only the portion of income above the threshold is taxed at the higher rate, not your whole income. Any short-term over-deduction from a single high-overtime month typically corrects automatically through PAYE's cumulative calculation across the tax year.

Last updated: 2 July 2026Last reviewed: 2 July 2026How we verify

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A common worry is that working overtime will result in losing most of the extra pay to tax, but the UK's progressive tax system means only the portion of income above a threshold is taxed at the higher rate, not everything you earn. **How marginal tax bands actually work** Each band of income is taxed only at that band's rate -- for 2026/27, income up to £12,570 is tax-free, the next portion up to £50,270 is taxed at 20%, and only income above £50,270 is taxed at 40%. Overtime that pushes your total annual income above £50,270 means just the amount ABOVE that threshold is taxed at 40%, while everything below continues to be taxed at the lower rates as before. **Why a single overtime-heavy month can look alarming** PAYE calculates tax cumulatively across the year, assuming your current pay period's rate reflects your annual pattern -- so a month with substantial overtime can trigger a temporarily higher tax deduction on that specific payslip, as if you earned that much every month, even if your annual total does not actually justify the higher rate. **It usually self-corrects** If your annual income does not actually reach the higher-rate threshold once averaged across the full tax year, the cumulative PAYE system corrects for the temporary over-deduction in subsequent pay periods, or via a P800 refund after the tax year ends if the correction is not complete through payroll alone. **Worked example** Someone normally earns £3,500 a month (£42,000 a year, all within the basic rate band). In one month, they work substantial overtime, earning an extra £1,500, taking that month's pay to £5,000. PAYE may temporarily tax part of this at 40% as if it reflected their new annual rate, but since their true annual income is still likely under £50,270, the excess tax withheld corrects itself in later months or via a year-end reconciliation. **The 60% trap zone** A genuine tax trap exists between £100,000 and £125,140, where the Personal Allowance tapers away at £1 for every £2 earned, creating an effective marginal rate of 60% in that specific band -- overtime that pushes total income into this range is worth checking carefully, since pension contributions can be an effective way to keep adjusted net income below £100,000 and avoid this trap. **Practical tip** Use the Take-Home Pay calculator with your annualised, not single-month, income to see your true expected tax position, and do not assume a single high-overtime payslip's deduction reflects your genuine ongoing tax rate -- check your year-to-date figures on your payslip for a more accurate picture of where you actually stand.